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The US dollar rose against other major currencies on Monday as US stock markets remained closed in preparation for hurricane Sandy and a risk-averse mood prevailed.
The dollar and the yen were in demand as analysts warned that risk aversion could prevail in the week ahead, with uncertainty over the US presidential elections and a gloomy set of third-quarter earnings from US companies.
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The Australian dollar underperformed during early Asian trading as concerns over a poor US earnings season continued to weigh on risk sentiment, even as figures on Friday showed an upturn in US economic growth. The Aussie fell 0.2 per cent to $1.0342.
“Global uncertainties this week will probably keep risk appetite constrained. Weak equity market performance throughout Asia and the renewed decline in commodity prices will leave the Australian dollar vulnerable in the near term,” said analysts at Morgan Stanley.
The yen was the only other major currency to rise against its peers, outperforming the US dollar, the euro and the Australian dollar as caution prevailed ahead of a Bank of Japan meeting on Tuesday.
Markets were widely expecting the BoJ to add a further Y10tn in asset purchases to its monetary easing scheme. However, some market participants were taking profits on their short yen positions ahead of the meeting.
Figures released on Friday from the US Commodity Futures Trading Commission showed that speculators increased short positions on the yen at the highest weekly rate in 18 months.
The dollar hit a session low of Y79.54 and was later flat at Y79.67. The Australian dollar fell 0.2 per cent to Y82.48 while the euro dipped 0.3 per cent to Y102.76.
The euro was also lower against the dollar ahead of a meeting between Mario Monti, Italian prime minister and Mariano Rajoy, the Spanish prime minister, later in the day, though hopes that Spain would request a bailout from its eurozone partners in the near future remained muted. The single currency fell 0.3 per cent to $1.2898.
